The Inspiring Story of Bob Young, a Graduate Who Had No Job When He Founded Red Hat

FameJuly 3, 2019

IBM Buys Red Hat

Bob Young was an unemployed man who was working from the sewing closet of his wife in 1993. He was working at a company that he had just co-founded. That company that started from the closet has now been acquired by IBM for a whopping $34 billion. It stands as IBM’s largest acquisition to date. Red Hat is an open-source software provider and IBM aims to use the company to expand its cloud computing enterprise. Young resigned as the CEO in 1999 after the company became public. In 2005, he left the board of the company’s directors to launch Lulu.Com

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Low-Risk Enterprise

At the time Young co-founded Red Hat, he said he didn’t have a job and had no money because he had sold his former business.

Young who graduated from the University of Toronto said he has always been an entrepreneurial businessman. He said he wasn’t the best student around and so his decision to start his own business was not about being smart or being a risk taker. He said it was because of his poor performance in school that he assumed that he had more chances of starting a company rather than going to apply for jobs.

He started his first business after his college graduation in 1976. At first, he was renting out typewriters while his other friends from college had started off careers as lawyers and accountants at big firms. He said his friends weren’t particularly impressed with his career choices at the time.

He later changed to leasing computers in 1984 when he launched Vernon Computer Rentals. After he struggled with finances during the recession in 1989, he sold the rental company.Greyvest Capital was the acquirer of the company and Young got roughly $4 million as the chief executive. The deal he, however, made was that he would work at Greyvest and he would stake his proceeds from his share in Greyvest. However, some months after the acquisition, Greyvest had serious financial issues and its stock declined so much that Young’s stake became worthless. Greyvest subsequently laid him off.

As at 1993, he had no job, a large mortgage, he had 3 kids and his networth was less than what he had when he even finished from college. However, he said all those events were what eventually made him launch Red Hat.

The experience he already had in the computer business made it possible for him to discover agap in the market for software. That in turn helped him develop the product that allow tech business to modify and also customize software in a way that suits their needs.

Unique Offering

Young said in early 90s, the company was the only one that offered open-source software as the big competitors such as Microsoft, Oracle and IBM were not willing to share the source code. He said he was a sales guy and he liked to sell things the customers wouldn’t be able to get from any other place.

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Young offered software on open-source Unix and Linux OS for sale

It was in 1993 that Young started the business of the sale of software on open-source Unix and Linux OS. He joined forces with March Ewing, a software engineer based in North Carolina. It was Ewing who brought up the company name as Red Hat which referred to a red baseball hat he wore when he was in college. Young then merged his company with that of Ewing which was a distributor open-source Linux software. The business subsequently moved to Durham in North Carolina.

Initial Funding for Red Hat

Young was the chief executive officer of the company and he utilized his background in sales to help with the operations of the company. Ewing was in charge of the software engineering. However, because they had no money, they had to get funding and in a quite creative way and both of them ended up incurring credit card debt.

He said there were so many credit card applications from banks during that period andhe kept getting credit card to pay up the ones from before. He said his debt later reached $50,000 and was spread over different cardstotalling nothing less than 8. He said he considered it to be creative finance and his wifewas the one who made the credit card finance work because her credit rating was good.

He now refers to her as probably the most important contributor to Red Hat’s initial success because without her credit rating he would probably not have been able to get the funding that later got the company profitable.